The principal difference between import and export is that import is that form of trade in which goods are bought by a domestic company from other countries for the purpose of selling it in the domestic market. On the other hand, export implies a trade in which a company sells goods to other countries which are manufactured domestically.
Trade refers to that branch of commerce which deals with the sale, transfer or exchange of products and services for a money consideration. It also aids in supplying goods to the ultimate consumer. Trade is of two types internal trade and external trade. Internal trade is when goods are traded within the geographical boundaries of the country and includes wholesale trade and retail trade.
On the contrary, external trade occurs when goods are traded different countries of the world and includes import, export and entreport.
Content: Import Vs Export
|Basis for Comparison||Import||Export|
|Meaning||Import is when a company buys goods from another country, with an aim of reselling it in the domestic market.||Export is when a company provides goods and services to the other countries for selling purposes.|
|Objective||To meet the demand for goods which are not available in the domestic country.||To increase the market share or global presence.|
|Represents||High level of import is an indicator of robust domestic demand.||High level of export is an indicator of trade surplus.|
Definition of Import
Import refers to a type of foreign trade in which goods or services are brought into the home country from a foreign country, for the purpose of reselling them in the domestic market. The following procedure is followed for the import of the goods:
- Trade Enquiry: The import procedure starts with the trade enquiry that how many countries and firms export the product required and so the importing company needs to obtain all the details from trade directories, trade associations etc. After getting the required information, the importing firm communicates with the exporting companies to know about their rates and terms of delivery.
- Obtaining import license: Some goods are subject to import license while others are not. So, the importer is required to have knowledge of the Export-Import policy in practice, to know whether the goods required by the importer needs import license or not. If it is required, then the importer must follow all the necessary steps for obtaining it.
- Procurement of foreign exchange: The importer is required to obtain foreign exchange as the exporter resides in a foreign country, and he/she will demand payment for the goods in the currency prevalent in the country, in which he/she resides.
- Placement of order: The importer places an order with the exporter for supplying the products. The import order contains details concerning the price, quality, quantity, colour, grade, etc. of the goods to be despatched.
- Acquiring letter of credit: On the agreement of the payment terms between the importer and exporter, then the importing company must obtain the letter of credit from its bank that shows the credibility regarding the realization of obligation.
- Arranging funds: The importer of the goods needs to arrange finance before they arrive at the port.
- Receipt of shipment advice: Once the goods are loaded on the ship, the exporter sends the shipment advice that contains the detailed information about the shipment of goods, such as invoice number, vessel name, bill of lading number, port of export, description of the goods despatched.
- Retirement of import documents: After shipping the goods, the exporter makes certain important documents as per contractual terms and gives it to the banker, to transfer it further, in the manner, as specified in the letter of credit.
- Arrival of goods: The exporter ships the goods, according to the contractual terms. The ship in charge informs the officer in charge at the dock that the products are arrived in the country and provides a document, namely, import general manifest.
- Customs clearance and release: Once the goods reach India, they are subject to customs clearance, which is a huge process, wherein a number of legal formalities have to be completed.
Definition of Export
Export can be defined as a form of trade in which domestically manufactured goods are sent to the foreign country, on demand of the overseas buyer. The process followed for exporting the goods to another country is given as under:
- Enquiry and Sending Quotations receipt: The potential buyer of the goods send an enquiry to various exporting firms and requests for quotations that comprise of its price, quantity, quality and terms and conditions. The exporters in return send proforma invoice detailing the items such as size, weight, quality, colour, grade, mode of delivery, packing type, payment etc.
- Order receipt: Once the buyer agrees to price, quantity, terms and conditions of the exporter, he/she places an order for dispatching the goods called as an indent.
- Determination of creditworthiness of the importer: After receiving the order, the exporter enquires about the credibility of the buyer (importer). This is to ensure that what are the chances of default in payment by the importer, once they reach the destination. And so a letter of credit is demanded by the exporter from the importer, to know the credibility.
- Obtaining license: The exporter has to fulfil certain legal formalities, as the goods are subject to customs laws which require that the exporter organization must have an export license before it moves forward.
- Preshipment finance: After obtaining the export license, the exporter approaches the bank or financial institution for obtaining pre-shipment finance for carrying out production activities.
- Production of goods: Once the exporter receives finance from the bank, the exporter then starts the production of the goods, as per the requirements of the importer.
- Preshipment inspection: There is a mandatory inspection of the goods by the relevant authority to ensure that only good quality products are exported from the country.
- Obtaining a certificate of origin: The importer countries provide tariff concessions or other exemptions to the exporter country goods and to avail such benefit, the exporter is required to send a certificate of origin to the importer. It ensures that the goods are actually produced in that country.
- Shipping space reservation: The exporter approaches the shipping company to reserve shipping space for the goods to be despatched. For this purpose, the exporting firm has to specify the nature and type of the goods to be exported, shipment date, the destination of the port, etc.
- Packing and Forwarding: After completing all the legal formalities and applying for the shipping space, goods are carefully packed and then all the details such as gross and net weight, name and address of the importer, country of origin and so forth. After that, all the necessary steps are taken by the exporting firm for transferring the goods to the port.
- Insurance of Goods: The exporter insures the goods with an insurance company to get protection from the risk of loss or damage during transit.
- Customs clearance: Next the goods should be customs cleared before loading them on the ship.;
- Obtaining mates receipt: The ship captain issues a mate’s receipt to the port superintendent when the goods are loaded on board the ship.
- Payment of freight: The mate’s receipt is surrendered by the Clearing and Forwarding (C&F) Agent to the shipping company determining the freight. After receiving it, the company issues the bill of lading that acts as a proof that the shipping entity has got the goods for taking it to the destination.
- Preparation of Invoice: Once the goods are sent to the destination, invoice of the goods is prepared, which states the quantity of the goods and amount due to the importer.
- Securing Payment: Lastly, the exporter communicates the importer regarding the shipment of goods. Next, to claim the goods title, the importer requires certain documents such as a bill of lading, invoice, insurance policy, letter of credit, certificate of origin etc., on its arrival and clearing customs.
The exporting company sends these documents to the importing firm with the banker and instructs to deliver it only when the bill of exchange is accepted.
Key Differences Between Import and Export
The points given below are substantial so far as the difference between import and export is concerned:
- Import, as the name suggests, is the process in which goods of the foreign country are brought to the home country, for the purpose of reselling them in the domestic market. Conversely, export implies the process of sending goods from the home country to the foreign country for selling purpose.
- The main idea behind importing the goods from another country is to fulfil the demand for a particular commodity which is not present or in shortage in the domestic country. On the other hand, the basic reason for exporting the goods to another country is to increase the global presence or market coverage.
- Import at a high level shows a robust domestic demand, which indicates that economy is growing. As against, high level of export represents trade surplus, which is good for overall growth of the economy.
Basically, there are two ways to import/export goods and services, wherein direct exporting/importing is one in which the firm approaches the overseas buyers/suppliers directly and completes all the legal formalities concerned with shipment and financing.
However, in case of indirect exporting/importing the firms have very little participation in the operations, rather intermediaries perform all the tasks and so in indirect exporting the firm has no direct interaction with the overseas customers in case of exports and suppliers in case of imports.